FMM calls for SME tax review, wider income eligibility bands

FMM In The News: BORNEO POST, October 25, 2026

KUCHING (Oct 25): The Federation of Malaysian Manufacturing (FMM) has called for a further review of small and medium enterprise (SME) corporate tax rates and a substantial widening of the income bands eligible for preferential rates.

FMM president Jacob Lee Chor Kok said this would help manufacturers retain and reinvest more of their earnings.

“Eligibility for SME tax treatment should also be aligned with the national SME definition, including removal of the RM2.5 million paid-up capital criterion.

“Capital-intensive manufacturers should be able to strengthen their capital base without unnecessarily losing access to development support. Greater reinvestment can generate higher productivity, better-paying jobs and stronger businesses, broadening the government’s revenue base over time,” he said in a statement on Sunday.

He said growing firms can face an abrupt loss of support when they cross existing eligibility thresholds, even while they still require assistance for technology upgrading, certification, talent development and market expansion.

This can leave larger SMEs without the resources to progress and create incentives for smaller companies to remain within existing thresholds, he said.

“A revised definition, complemented by graduated support for companies moving beyond SME status, would provide a clearer path for expansion.

“Support should encourage productive investment and measurable improvements in capabilities, allowing companies with greater growth potential to contribute more to domestic investment, employment and exports,” he added.

He said FMM reiterated its proposed RM1.5 billion Smart Manufacturing Support Package for 2027–2030, comprising RM500 million for automation, RM750 million for manufacturing digitalisation and RM250 million for artificial intelligence (AI) adoption.

Complemented by enhanced capital allowances, affordable financing and fully subsidised On-site Smart Factory Assessments, the package would help firms identify suitable technologies and implement them effectively, he said.

According to him, industrial upgrading also requires stronger Research, Development, Innovation, Commercialisation and Economy (RDICE) linkages.

“SMEs need accessible R&D incentives and closer collaboration with universities and research institutions to translate research into improved processes, commercially viable products and Malaysian-owned technologies.”

He said FMM’s proposed RM1 billion National Manufacturing Research and Innovation Endowment Fund, with contributions from both government and industry, to provide sustained financing for industry-led research and commercialisation.

Support for applied research, prototyping, testing and pilot production would help SMEs bridge the gap between a promising idea and a marketable product, he said.

Leaving more capital with industry would also strengthen domestic direct investment (DDI), he said, adding that reinvestment by existing Malaysian manufacturers deserved sustained policy attention alongside the attraction of new investment.

“Enabling local companies to modernise and expand will build domestic capabilities and strengthen Malaysia’s ability to capture value from investment flows,” he said.

Lee pointed out that helping SMEs meet technical specifications, quality standards, certification requirements and delivery commitments would deepen industrial linkages and create more opportunities for Malaysian firms in regional and global supply chains.

Geopolitical tensions and trade disruptions make these linkages increasingly important, he said.

He thus called for stronger vendor development, local sourcing and partnerships between anchor companies and domestic suppliers, supported by its proposed RM100 million National Supply Chain Resilience Fund.

“Developing alternative sources of critical inputs and stronger local production capabilities would reduce vulnerabilities while generating new domestic investment opportunities,” he said, adding that FMM would continue to engage with the government to build on National Budget 2027’s initiatives.

Source of article: www.theborneopost.com